Pay the poor for good behavior?
New York Mayor Bloomberg wants to reduce poverty through cash incentives. It just could work.
What if poor parents were paid to talk with their kid's teacher? Or to visit a dentist, or get job training? New York's mayor believes such incentives can reduce the nearly 20 percent poverty rate in his city. Kudos to him for taking a new crack at an old problem.Skip to next paragraph
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Mayor Michael Bloomberg's hope is not just a wispy dream. Similar incentive programs in other countries have a proven track record and broad political support. In Mexico, such an approach has helped to raise school attendance, improve nutrition, and reduce extreme poverty. The World Bank enthusiastically backs the idea, which is being practiced in about 30 countries.
The mayor, a Republican, is not above importing policy, as long as it works (he plans to copy London's tax on downtown driving to fight global warming).
The city will start the privately funded, anti-poverty experiment in September, measuring it against a control group of nonparticipants. Those in the pilot plan can earn up to $5,000 a year by meeting criteria related to health, education, and work. That amounts to a 25 percent raise for a family of four living below the poverty line of about $20,000. If the plan succeeds, the mayor wants to commit public funds to expand it.
It's no shock that a mayor is reaching for this kind of innovation. Cities and states are America's problem-solving laboratories. What is surprising, and refreshingly so, is new national attention to poverty.
Politicians usually avoid the "P" word. It doesn't sell as a campaign topic. Nor are the poor big voters. And in the economic boom years of the 1990s, poverty decreased and the pressure was off.
But in 2005, hurricane-battered New Orleans exposed American poverty for all to see. That year, poverty in the US held steady at 12.6 percent, or 37 million people, but it rose in the four previous years. Next month, a Conference of Mayors task force will meet to draft an anti-poverty agenda. And presidential candidate John Edwards is making poverty his campaign theme.
Poverty can be a politically polarizing issue, with Democrats traditionally claiming its roots as structural (loss of manufacturing jobs, poorly funded schools, etc.) and Republicans seeing the cause as social or personal failures (teen mothers, absent fathers).
The value of Bloomberg's plan is that its incentives approach reinforces an emerging political consensus on how best to help the poor.
The New Deal and Great Society programs generally didn't require people to change behavior to get assistance – thus the birth of the "welfare queen." But the welfare reform of the last decade showed that people really do want to do for themselves; they just need an incentive, or a consequence.
Not only did plunging welfare rolls prove that point, but so has another incentive-based tool for the poor: the Earned Income Tax Credit. That direct payout is available only to whose who work. Studies show it has reduced both family and child poverty.
The poor are just as interested in advancement as anyone. But a nighttime office cleaner can't spare the hourly wages to attend parent-teacher night, that, say, the daytime salaried worker in that office could. It will be worth tracking whether Bloomberg's program really will allow the poor to do that – and many other things to lift themselves up.